Europe tests how far it can go without provoking Trump

EUROPE

Brussels is accelerating trade deals beyond the US and China, but the strategy could be misread in Washington and trigger a trade war.

THE European Union risks triggering a trade war with the United States as it rewires its global trade strategy to reduce dependence on both Washington and Beijing, according to a new strategic risk assessment.

A new report by Sibylline identifies “European divestment and derisking” as the bloc’s top strategic risk for February and warns that efforts to diversify trade and supply chains could provoke retaliation from the US if they are seen as discriminatory or hostile.

“Our most dangerous scenario is that Europe’s push to diversify trade and assert strategic autonomy is interpreted in Washington as hostile or protectionist, triggering retaliatory measures that escalate into a trade war,” said report author and European Intelligence analyst Magdalena Lembovska Young.

Brussels increasingly views US policy unpredictability, including the use of tariff threats as a foreign policy tool, as a “geopolitical threat to its economic stability”.

Under the report’s most dangerous scenario, EU efforts to assert strategic autonomy trigger “a major trade war with the US”.

High-risk indicators include stalled ratification of the EU–US trade agreement, unresolved disputes over automotive and food safety standards, and tougher enforcement of EU digital rules against US technology firms.

A long-term liquefied natural gas agreement with Canada could also be seen in Washington as undermining Europe’s pledge to buy USD 750 billion of US energy through 2028, the report warns.

Any tit-for-tat measures would have “a detrimental effect on the transatlantic relationship” and “significantly increase business risks”.

Despite those warnings, the assessment stresses that this is not its central forecast.

In its most likely scenario, the EU accelerates diversification while continuing to treat the relationship with Washington as “strategically indispensable” and seeking to de-escalate disputes.

Disagreements with US technology firms, it notes, have increasingly been resolved “in a very discreet manner”.

In January, the EU signed free trade agreements with India and the MERCOSUR bloc and concluded a strategic partnership with Vietnam.

Negotiations are now under way with Australia, Malaysia, the Philippines, Thailand and the UAE.

These show the way forward.

Although internal divisions among member states have delayed full ratification of the Mercosur treaty, , the European Commission is likely to push for provisional or partial implementation to secure early economic and geopolitical gains.

“If you are in front of someone as confrontational as Trump, you cannot be in a one-to-one relationship,” said Foucart, a senior economist at Lancaster University.

“You need to have leverage in the form of outside options.”

China, he added, was not a viable counterweight for most European governments.

“There is no clear majority in Europe to take the risk of actually doing something meaningful with China,” he said.

“There is as much pressure in the EU to go away from China as there is pressure to use China as leverage on the US.”

Instead, Brussels is attempting to build alternatives through agreements with other countries.

Recent trade deals with India and Latin America illustrate that approach.

“These are exactly the mechanisms that prove Europe could be divesting from both the US and China,” he said.

“Mercosur may be awaiting judicial review, but it already works as proof of concept.”

Foucart said the UK’s position outside the EU gave it more room to manage relations with Washington quietly.

“The advantage of the UK right now is that it is under the radar,” he said.

“It can avoid being openly confrontational and play a more pragmatic role with Washington.”

But he warned that domestic politics limited how far that approach could go.

“Being seen as a stooge of Trump, who is extremely unpopular in the UK, is dangerous – not even Farage wants to do it,” he said.

Foucart said the greater danger was not provoking Trump, but appearing too weak to him.

“Trump’s tactic is to be aggressive with those he perceives as weak,” he said.

“If he understands that Europe has no outside options, it risks permanent pressure, if not a trade war.”